Developers hit fee Daley proposes on big projects

(Crain's) -- Mayor Richard M. Daley has proposed a fee of 15 cents a square foot fee on large development projects, one item on a long shopping list of increased taxes and new fees intended to close a projected $196-million deficit in Chicago's 2008 budget.

Developers, which currently pay a review fee of just $12 per planned development, are already criticizing the proposal, which city officials say would generate about $2 million in revenue next year.

"This is not a fee on a small interest group," says William Bornhoff, managing director of the Chicago Real Estate Alliance, a developers' group. "This increases the cost of doing business in Chicago."

Depending on how the fee is calculated, a 670,000-square-foot development could trigger a fee of up to $100,500, says Alan Lev, incoming president of the Home Builders Assn. of Greater Chicago.

"That's real money," says Mr. Lev, president of Chicago developer Belgravia Group Ltd. "And, of course, there is no discussion of it with the home builders' community."

Last week, city officials said the fee would be 15 cents per square foot of buildable floor area. The fee would apply to planned developments -- large projects such as retail buildings with at least 75,000 square feet or townhouse complexes of at least 40 units.

City officials say revenue from the new fees would be used in part to "streamline" the review process, which is handled by the Department of Planning and Development. Three planned-development reviewers would be added to the existing team of eight employees.

"There's going to be a balance with the fees being raised," says Tony Binns, a Planning Department spokesman.

Despite increased revenue from the new fee, the Planning Department's budget would be cut 5.4% next year, to $18.3 million, under the Daley administration's proposal. Much of that reduction would be the result of shifting 16 positions that administer the city's tax-increment financing districts from the Planning Department budget to TIF funds, according to the proposed budget.

In other budget-related news:

With the residential market expected to remain weak next year, the Daley administration is predicting that revenue from the real estate transaction tax will remain flat, at $210 million. The tax is $3.75 per $500 of the purchase price.

The city is putting renewed emphasis on selling city-owned land, with the proceeds from such sales expected to increase 32%, to $15.8 million in 2008, compared to 2007. Such sales peaked at $23.5 million in 2005.